Bo Xilai trial shines light on business ally’s ties to CCP elite

Businesspeople in China succeed by having close political ties, and when one goes down, the other is likely to follow

By David Barboza / NY Times News Service, SHANGHAI

Sun, Aug 25, 2013 - Page 9

For years, Xu Ming (徐明), once a little-known entrepreneur from northeastern China, worked his way into the good graces of the families of China’s political elite.

He cared for the parents and children of the powerful, accompanied officials on foreign trips and enriched their relatives — as well as himself — through early investments in businesses that eventually went public.

However, Xu is now in custody and one of his most important relationships has become a central piece of evidence in the much anticipated trial of former Chongqing Chinese Communist Party (CCP) secretary Bo Xilai (薄熙來), which began on Thursday morning, according to a microblog post by the court handling the case.

Xu, who is 42, funneled millions of dollars in bribes to Bo and his family, including paying for trips to Europe and perhaps even giving the family a US$3.5 million villa on the French Riviera, according to people briefed on the indictment against Bo that was read by the prosecution when the trial got under way.

Those charges — along with accusations that Bo abused power by obstructing a murder investigation — could result in a lengthy prison term for Bo, the son of a communist revolutionary and a former top Chinese leader whose fall from power last year shook the political establishment in Beijing.

However, analysts say that the CCP’s decision to rely on evidence linked to the businessman could also be risky because Bo was by no means Xu’s only political patron.

Although the trial itself was closed to the public and its proceedings expected to be released only selectively by state media, judicial scrutiny of how broad political connections can greatly enrich an otherwise obscure businessman could prove delicate to more than one member of the Chinese leadership — and raise questions about whether Xu’s ties to other leaders should receive legal scrutiny.

There have been no publicly announced charges against Xu and there is no evidence that his links to other prominent political clans included the kind of direct payments he was alleged to have made to Bo.

However, according to public records obtained by the New York Times, Xu had close business and personal ties to family members of several senior Chinese officials, including former Chinese premier Wen Jiabao (溫家寶), who was one of Bo’s chief political rivals.

Xu had unusual access to the homes of Beijing leaders, offered to care for some of their parents and even traveled with some of them on official visits abroad, according to longtime business partners of Xu’s and government travel records.

For instance, in 2002, he accompanied then-Chinese state councilor Wu Yi (吳儀) on a trip to the Middle East. Back home, visitors to his company, Dalian Shide, included CCP politburo members Huang Ju (黃菊) and Li Changchun (李長春), who have since stepped down.

In addition, starting in the late 1990s, Xu invested in a series of private companies with the relatives of Wen, who retired in March last year. Xu for a time even dated Wen’s only daughter, Wen Ruchun (溫如春), according to close associates.

“He was a public relations genius,” said Larry Cheng (程毅君), one of Xu’s longtime business partners. “He was helping everyone in the leadership. He knew just who to get close to and how to do it.”

Xu and members of the Wen family could not be reached for comment, but Xu’s ability to curry favor with China’s ruling elite shines a light on how some business gets done in the country’s tightly regulated economy.

Chinese entrepreneurs say that to get access to land, licenses and capital, they are expected to cater to the needs of CCP officials and their families. That can mean paying school tuition, entertaining spouses and giving corporate shares to the relatives of public officials.

This makes them vulnerable when an official they are close to gets forced out in a power struggle and is accused of corruption.

“To be a successful businessman in China you need to play the game and even corrupt an official, which makes you very vulnerable,” said Chen Zhiwu (陳志武), a professor of finance at Yale University. “If you don’t cooperate with them, you won’t succeed. Those are the choices you have in a system where government power is unchecked.”

Xu, a paunchy, soft-spoken billionaire, was detained last spring, shortly after the authorities removed Bo from his post as party chief in Chongqing.

“He was a very nice guy when I met him in 2000,” said Hu Kun (胡坤), a former insurance executive. “He was just about 30 years old, but he was clearly in charge. And when approval was needed for a license, he just picked up the phone and called the Shanghai party secretary’s office. Then he said: ‘It’s done,’ and we ate dinner.”

Xu grew up poor in a village in northeast China’s Liaoning Province and studied at a small aerospace college before finding work in Dalian at a company that exported shrimp to Japan, according to China’s state-run media.

Soon after, in the early 1990s, he formed Dalian Shide and won local government contracts to create landfills and beautify the city under Bo, who served as mayor there between 1992 and 2000.

By the age of 28, Xu was a multimillionaire and controlled a company that was fast becoming a conglomerate, by expanding into plastics, chemicals and real estate.

In Dalian, his connection to Bo was unmistakable. One of his top executives at Dalian Shide had worked as a close aide to Bo when he served as Liaoning governor. Xu also had indirect business ties to the family after he formed a consulting firm with Cheng. Cheng was at the same time serving as a business partner to Bo’s wife, Gu Kailai (谷開來), a lawyer.

When Gu and her young son, Bo Guagua (薄瓜瓜), traveled to Britain to search for a school for the younger Bo to attend, Xu covered all the expenses, according to one of his former business partners.

Later, as his ambition grew, Xu began networking with other powerful political figures in Beijing, according to people who worked with him. None of those relationships has come under legal scrutiny, at least publicly. However, Xu’s associates say he generally sought to develop deep personal and financial ties with close relatives of senior leaders, the way he did with Bo Xilai.

For instance, in the late 1990s, he grew friendly with Zhang Beili (張蓓莉), a diamond expert and the wife then-Chinese vice premier Wen Jiabao. They worked on the same floor in Beijing’s Ping An Insurance building, according to corporate records and interviews with his former business partners.

“Half the office in that Ping An building was Xu Ming and half was used by Zhang Beili,” one of his former business partners said.

While Xu was dating Wen Ruchun, he treated Wen Jiabao’s only son, Wen Yunsong (溫雲松), like a close friend, the former business associates said.

His relations with the Wen family also extended into business.

In about 1999, Xu’s company began making deals with Sino-Diamond, a Chinese diamond company that was partly controlled by Wen Jiabao’s relatives. Around the same time, Xu invested in a Dalian diamond mine and in Jiaxing Carbon Fiber, another company partly controlled by Wen family members, according to shareholder records. (Xu also served on the Jiaxing’s board of directors with Wen Yunsong.)

Xu also moved into finance. In 2000, he helped found Sino-Life Insurance with a group of companies partly owned by Wen’s brother-in-law and his mother. Sino-Life later hired Wen Yunsong’s company as its information technology supplier, according to interviews with people familiar with the deal.

Insurance stakes, including a large public offering holding that he acquired in China Pacific Insurance, became the cornerstone of Xu’s fortune. Forbes estimated that he was China’s eighth-wealthiest businessman in 2005.

Nevertheless, early on, he came under pressure to explain his ties to the Wen family. In 2002, the Far Eastern Economic Review published an article saying that Xu was the son-in-law of Wen Jiabao.

He responded with a terse letter to the editor of the publication, saying: “I am not Vice Premier Wen [Jiabao]’s son-in-law. I have no personal relationship with Wen or his family.”

The letter was not accurate, but it reflected the delicacy of political and business relationships even in the early days of China’s economic boom.

Xu and Wen eventually broke off their relationship, people familiar with the couple say. By most accounts, Xu began drifting closer to Bo Xilai, his longtime patron from Dalian, who had moved to Beijing as minister of commerce, before being named party boss of Chongqing in 2007.

When Bo Xilai was detained in March last year, it was only a matter of time before Xu was also facing detention, given his extensive ties.

“Xu Ming’s case made some people nervous,” Chen said. “But it wasn’t a watershed. Xu Ming was too tied to Bo Xilai, and many businessmen didn’t like Bo Xilai.”